The Steam big-picture mode is pretty slick, but not all of the games work seamlessly with an xbox controller so I've found that you generally need to keep the mouse and keyboard around.
Instead of keeping it plugged into my TV, I now plugged in an old monitor and the girlfriend has been enjoying the sims 3.
Steam absolutely knows what they're doing and they have a real shot of widespread adoption if they build their own linux based Steam Box. The big issue is going to be game compatibility with whatever hardware / controller configuration they go with.